Britain’s huge hospitality sector has called for a full scale investigation into the “unscrupulous” way the energy industry sets gas and electricity bills for restaurants, pubs and hotels.
Trade body UKHospitality has written to the boss of the Competition and Markets Authority (CMA) to demand a probe into “one of the biggest millstones around hospitality’s neck.”
In the letter to the CMA’s chief Sarah Cardell UKHospitality said the criteria for a Market Investigation Reference (MIR) had been “undoubtedly met”, including reasonable grounds for suspecting competition is not effective, as well as the scale of the problem.
A formal investigation is the only way to address “entrenched competition problems” in the non-domestic energy market, the trade body said. It could also recommend remedies are available to address the issue.
Soaring energy bills have posed one of the biggest threats to the viability of thousands of bars, pubs and restaurants.
The demand for an investigation comes as the sector braces itself for huge increases in National Insurance and wage bills in April.
The proposal for an MIR came as a result of research by David Osmon of consultancy Ideal Economics and a former economist at Ofgem, the Competition Commission and the Office of Fair Trading.
He said: “The energy market is completely broken as far as many businesses are concerned. A fresh market investigation would deliver a significant boost to economic growth at virtually no cost to the government.”
In March 2023, Ofgem made a commitment to the then Chancellor Jeremy Hunt to consider recommending a market investigation by the CMA if it had reasonable grounds to suspect that competition in the market was not effective.
In July 2023, Ofgem’s own review confirmed a lack of effective competition but did not order a market investigation.
Hospitality businesses claim energy suppliers treat them as “high risk” and therefore charge premium rates or even deny supply.
The CMA found in 2016 that a lack of competition in the energy market was causing SMEs to pay 18% too much for energy, an estimated total of £500 million per year.
UKHospitality CEO Kate Nicholls , said: “The business energy market remains one of the biggest millstones around hospitality’s neck.
“Over decades, it has been proven that it is not fit-for-purpose. It has unscrupulously excluded businesses from accessing energy, charged them extortionately when they do offer contracts and treated operators with contempt when they come to suppliers for help.
“All of the conditions have been met to justify a thorough investigation and both the CMA and Ofgem have recognised independently that the market is not working effectively.
“With the Government rightly looking at how regulators operate, a swift investigation into the non-domestic energy market would be a prime example of a good regulator acting to the benefit of the market and investment.
“After all, there is nothing more detrimental to business investment in the UK than having to pay an excessive amount for energy and potentially not even being able to access it at all.”
A market investigation reference could be made by either Ofgem, the CMA itself or by Energy Secretary Ed Miliband.
